🏛️ When Funeral Cover Fails: Lessons from a FAIS Ombud Determination

Talking about death may be uncomfortable, but not talking about funeral insurance could leave loved ones financially exposed.

In South Africa, funerals often hold deep cultural significance and can come with considerable financial pressure. For many, funeral insurance offers an important way to ease that burden. But it only works when it delivers on its promise.

Unfortunately, the Office of the FAIS Ombud continues to receive complaints where policyholders pay premiums faithfully, only to face claim delays or outright rejections, often due to non-compliant providers or misinterpreted policy terms.

The Determination, When a Funeral Cover Provider Fails

In a recent media release by the FAIS Ombud, a determination was issued against a funeral service provider (the Respondent) who operated without an underwriter, in contravention of the Long-term Insurance Act.

The Ombud found that the Respondent:

• Collected premiums from consumers while unlawfully operating without a licensed underwriter

• Failed to honour multiple valid claims, despite repeated promises of payment

• Breached key Policyholder Protection Rules (PPRs), and Treating Customers Fairly (TCF) outcomes

According to the Ombud:

“Policyholders had paid their premiums and submitted valid documentation, yet only partial payments or none at all were made. These were clear breaches of contract and regulatory obligations.”

The matter was escalated to the Financial Sector Conduct Authority (FSCA), which suspended the Respondent’s FSP licence.

What Funeral Parlours Must Do to Remain Compliant

If you are a funeral parlour offering or selling funeral cover, you are subject to strict legal and regulatory requirements, and failure to comply can result in suspended licences, financial penalties, or legal action.

To remain compliant, funeral parlours must:

• Be an authorised Financial Services Provider (FSP)
  You must be licensed by the FSCA to offer or advise on financial products, including funeral insurance. Operating without a valid FSP licence is an offence under the FAIS Act.

• Have a valid intermediary agreement with a licensed long-term insurer
  In terms of the Long-term Insurance Act, all funeral policies must be underwritten by a registered insurer. If you are collecting premiums or selling cover, your business must have a formal agreement with a licensed insurer.

• Disclose all policy terms clearly
  Customers must receive proper documentation outlining benefits, waiting periods, exclusions, and claims processes. Transparency reduces the risk of disputes and regulatory complaints.

• Treat customers fairly
  You must comply with the Treating Customers Fairly (TCF) framework. This includes making it easy for clients to claim, switch, cancel, or raise complaints without unfair barriers.

Failure to comply may lead to licence suspension, reputational damage, and rejected claims.

What to Check Before Buying Funeral Cover

(Based on the FAIS Ombud’s recent media release)

The FAIS Ombud has urged consumers to do the following to protect themselves from unlawful or unreliable funeral cover:

• Confirm the underwriter
  Ask for the name of the underwriting insurer. Verify their status on the FSCA website.

• Check FSP authorisation
  Any business offering funeral policies must be licensed. Confirm their FSP number.

• Ask for a policy document
  This should include your name, the names of covered lives, waiting periods, exclusions, and claims procedures.

• Understand your responsibilities
  Missing premium payments or providing incorrect information can lead to claim rejection.

• Never sign blank forms
  It’s unlawful for an FSP to request or accept blank-signed documents. Complete everything yourself and keep a copy.

• Only insure where there’s insurable interest
  You can’t insure someone unless their death would cause you financial loss (e.g., family or dependents).

• Avoid policy duplication
  Too many overlapping funeral policies can delay claims and draw regulatory scrutiny.

FSPs, Don’t Wait for a Determination

The Ombud’s findings are a stark reminder that poor compliance doesn’t just harm consumers, it could shut down your business.

If you're unsure whether your funeral product is underwritten, or if your intermediary agreement is valid, speak to FSPCOMPLY. We help with:

• Compliance reviews

• FSCA notifications

• Policy structuring

• Risk assessments

• TCF and PPR alignment

Make sure your clients are protected, and so is your licence.